Sunday, May 13, 2012

NYT "Essayist" Confuses Bernard Mandeville and Adam Smith

William
Deresiewicz,an essayist, critic and the author of “A Jane Austen”, the Opinion
pages: Education.” Writes in the New York Times, Sunday
Review (13 May) HERE

“Capitalists and Other Psychopaths”

“Mandeville
believed the individual pursuit of self-interest could redound to public
benefit, but unlike Adam Smith, he didn’t think it did so on its own. Smith’s
“hand” was “invisible” — the automatic operation of the market. Mandeville’s
involved “the dextrous Management of a skilful Politician” — in modern terms,
legislation, regulation and taxation. Or as he versified it, “Vice is
beneficial found, / When it’s by Justice lopt, and bound.”

Comment

Read the tendentious article and judge its
objectivity for yourself – for
instance Deresiewicz
reports a survey that finds that 10 per cent of a sample have psychopathic
tendencies, which sample becomes all capitalists! His knowledge of Jane Austen does not include much exposure
to statistics.

I
selected the above paragraph for comment. The “essayist, critic and author” confuses
Bernard Mandeville and Adam Smith, as do many critics and worshipers of Smith
(like Ayn Rand), presents a modern invention of Smith’s use of “an invisible
hand” metaphor that is distinctly different from what Smith actually said, and
jumps to his irascible, even vitriolic, conclusion.

Adam
Smith never wrote about an invisible hand of the market or of any other of the
fantasies among critics of and apologies for corporate capitalism. Smith’s was a simple example of a
merchant (not all merchants) concerned about the “security” of his capital and
therefore preferred to invest locally in “domestic industry” rather than take
the risks associated with sending it “out of his sight” abroad on “foreign
trade” or shipping. From this
inhibition, he was driven by his perception of risk to invest it domestically,
which had the consequence that domestic “revenue and employment” (known today
as GDP) rose by the arithmetic amount of his domestic investment (the whole is
the sum of its parts – hardly heavy maths!). Smith regarded this growth as a public benefit, because it created paid work for poor labourers.

In
short it was a specific example, for which Smith used the metaphor of “led by
an invisible hand” to describe “in a more striking and interesting manner” the
metaphor’s object – the invisible (to others) motives of the merchant from his aversion to
risk. That is all the famous and
misunderstood figure of speech of Smith’s was about. A specific, not a general case for what all merchants did; it is an example of the rules of English grammar, which an “essayist, critic and author”
should recognise instantly. [Note
to William Deresiewicz: Adam Smith taught “rhetoric” from 1748-63 and defined
metaphors in his “Lectures of Rhetoric and Belles Lettres”, p 29 [1763] 1983
Oxford University Press.]

Smith
never claimed that “self interested” individuals, whether merchants, kings,
legislators, landlords, and the general public, acted so that whatever they did
when motivated by self-interest led somehow to public benefits. That would be absurd. In fact, Smith detailed, on over
70 occasions in Books I, II, and III of Wealth Of Nations, examples of the
malign, not benign, outcomes of the self-interested actions of individuals. The whole of Book IV is a "violent" polemic against the self-interested actions of traders in mercantile political economy. In Moral Sentiments, the book is
replete with examples of self-interested individuals behaving immorally, with
no redeeming features either for themselves or for others from their
conduct. Gekko's "Greed is Good" mantra is not part of Adam Smith's philosophy.

Any
claimed resemblance between Bernard Mandeville’s ‘private vice, public benefits’
philosophy – described by Adam Smith as “licentious” – and Smith’s articulation
of “self-interest” is a category one error.